1099-MISC for a refund from a settlement inside my Traditional IRA

[c2computer]

I received a 1099-MISC for a refund of fees from a settlement between UBS and the SEC.  The refund was credited to my traditional IRA, no money was taken out of the IRA.  I don't understand how I can pay taxes on money that I never withdrew from the IRA.  Anyone have any ideas on what to do here, I can't see paying taxes on money that was never withdrawn not to mention paying taxes twice on this when I do withdraw it someday after reaching 59 1/2 years old.  Thanks

[bobp55]

From what I have read online, if the fee was originally taken from your traditional IRA and then the fee rebate was directly deposited back to your traditional IRA, you have no current tax liability. I don't know how TurboTax will handle the situation for the 1099-MISC you received. 

[ThomasM125 · Accepted solution]

The fees are not taxable a they don't represent income. You can report the form 1099-Misc on your tax return and then enter a negative adjustment to Other Income to cancel it out. Or, you can just leave the 1099-Misc off of your tax return. If you do that, the IRS may assess taxes on it later, but you can get it removed by telling them that the receipt is not taxable.

You would report the form 1099-Misc in the Income and Expenses section of TurboTax, then Other Income, then Income from form 1099-MISC.

The offset entry would be as follows:

 Go to the Income and Expenses section of TurboTax

 - Choose  Less Common Income

 - Choose Miscellaneous Income, 1099-A, 1099-C

 - Choose Other reportable Income

 - Enter a description and the amount of your offset as a negative number

[MinhT1]

If the form 1099-MISC is issued to your IRA account, then it is not taxable. All income within the IRA account is tax-deferred.

You do not enter that form 1099-MISC on your personal tax return.

[c2computer]

Thanks for all the help on this.  I think it's best to put the 1099-MISC on the return so it does not appear I am hiding anything and the negative offset for the income since it is not taxable.  I just don't understand why they ever issued it in the first place, no one can answer that question.  Thanks